Under the presentation currency translation (PCT) method, which of the following statements is correct?
A) Transaction exposure is greatest.
B) The relationship of balance sheet items is best preserved.
C) Income statement items are translated using a mix of rates.
D) Income statement items are translated using average rates.

Question

Quizplus · Accepted Answer

The PCT method preserves the relationship of balance sheet items as they are translated using the exchange rate at the balance sheet date. Transaction exposure is not relevant for PCT as it pertains to individual transactions, while PCT looks at the entire financial statement. Income statement items are translated using exchange rates for the period, not average rates.

Under the Presentation Currency Translation (PCT) Method, Which of the Following